INSIDE RETAILING.

Chiasso files for bankruptcy

Water Tower outlet to stay open

Chiasso, the Chicago-based catalog company and retail chain, filed for federal bankruptcy protection from creditors Tuesday.

It was a painful decision, said Chiasso Chief Executive David Marshall, and one he hoped to avoid.

But Chiasso's stores have struggled since the fourth quarter of 2001, when same-store sales plunged 15 percent. Marshall was hoping for a big upturn this year. Instead, he got hit with another 15 percent sales decline for the holiday sales period this year.

Chiasso's eclectic and quirky home accessories, many of them from European designers, may have been viewed as purchases that easily could be postponed by increasingly frugal U.S. consumers. A dropoff in mall traffic after the Sept. 11 attacks didn't help either.

But it was the expense of a national retail store rollout that left the company vulnerable to an economic downturn.

Chiasso, which racked up about $20 million in sales last year, isn't going away, Marshall vows.

However, its store operation will shrink dramatically. Ten of the company's 14 stores will be closed, leaving a core of four, including the one in Chicago's Water Tower Place. The company's catalog and e-commerce operation will become its main focus.

"We didn't file to liquidate. We intend to reorganize and come out as a stronger company," Marshall said.

The big loser from Chiasso's reorganization is Holden Capital, a Denver-based venture capital company that owns more than 80 percent of its privately held equity.

Holden, which was once based here, invests money on behalf of Chicago's Searle family, which made its fortune in pharmaceuticals.

Hot property: When Chicago planners and architects envisioned a remodeled Navy Pier back in the early 1990s, they thought of it primarily as an entertainment and exhibition venue. So they didn't allocate a lot of space for retailers, and a chunk of what they did set aside was devoted to mom-and-pop vendors who operate from carts in an arcade walkway.

But the retail piece of Navy Pier has turned out to be a big success. Helped by the proximity of the Chicago Children's Museum and an IMAX theater, retailers with a child-oriented theme have prospered.

Among them: Magic Masters, which demonstrates and sells magic tricks; Go! The Game Store, which sells board games; and the Sports Store, which hawks jerseys from Chicago's sports teams.

Joining them this spring will be Build-A-Bear Workshop, the hot retail chain from St. Louis. At Build-A-Bear, children who are tired of the giant Ferris wheel and carousel can select a "pelt" and have a Teddy Bear or other furry friend constructed for them right away to take home.

The interactive retail experience has turned out to be very popular with parents with young children, a key component of the almost 9 million people who visit the pier every year. The Navy Pier location will be Build-A-Bear's fifth in the Chicago area.

"Our plan is always to open in the top malls across the country," said Maxine Clark, who calls herself Build-A-Bear's chief executive bear.

To make room for the 3,000-square-foot Build-A-Bear store, Navy Pier is relocating its own store, which sells Chicago- and Illinois-themed items.

It wasn't easy to find the space because Navy Pier's retail space is 100 percent leased, said spokeswoman Marilynn Gardner.